Rent Sense: A Lease Requires Your Attention- Part 2

Rent Sense: A Lease Requires Your Attention By Neil Fjellestad and Chris De Marco FBS Property Management Part 2 Here are some suggestions to give you more confidence during the leasing process – • Ask the individual that shows you the rental property (house, condo, and/or apartment) whether you can rely upon the lease agreement […]

Rent Sense: Some things don’t change- Part 2

Rent Sense: Some things don’t change By Neil Fjellestad and Chris De Marco FBS Property Management  Part II If you’re a local rental owner now you hold a winning ticket if you want a preferred retirement. A preferred retirement includes a personal residence plus rental properties held without debt and managed by professionals. This financial […]

Best Practices- New Laws- Are you compliant?

Best Practices- New Laws

By  Lucinda Lilley

We have asked FBS Vice President, Lucinda Lilley, to present a series of articles “Best Practices for Independent Rental Owners” that will be available in various publications from time to time and become a regular feature at Rent Sense.

Lucinda is a Certified Property Manager (CPM) and a Graduate of the Realtor Institute (GRI). Her 25-year distinguished property management career has been refined with earning these internationally recognized professional designations. Ms. Lilley is an industry leader currently serving as a board member for the local chapters of two of the most influential national trade organizations within the real estate industry; the National Apartment Association and the Institute of Real Estate Management. She is an expert on “best practices” and therefore an indispensable resource to our independent real estate investors. Neil & Chris

On August 19, 2013 Governor Jerry Brown signed Senate Bill 612 (Leno) into law. The legislation expands the protections afforded to domestic violence victims when terminating a residential lease. Under current law, a resident who is a victim of domestic violence, stalking, sexual assault or elder abuse may terminate their lease by providing a police report or a protective order issued by the court.

The new law, which goes into effect January 1, 2014, allows for additional forms of documentation that a resident may present to a property owner or manager to end their lease. Documentation from a “qualified third party” or a “health practitioner” must now be accepted. Additionally, these protections are extended to victims of human trafficking.

A “qualified third party” is defined as a domestic violence counselor, sexual assault counselor, or human trafficking caseworker, while the law defines “health practitioners” as physicians, surgeons, psychiatrists, psychologists, registered nurses, licensed social workers, licensed marriage and family therapists, or licensed professional clinical counselors. Prescriptive language for the Tenant Statement and Qualified Third Party Statement is also included in the law.

Under the new law, a landlord is prohibited from disclosing any information provided by the tenant regarding the early termination of his or her lease based on documented abuse unless: (a) the tenant consents in writing to the disclosure; or (b) the disclosure is required by law or order of the court. However, a landlord may contact a qualified third party to verify the legitimacy of the statements.

The law includes a sunset provision for the definition of “qualified third party” for legislative review. In addition, Judicial Council was given an extended deadline of July 1, 2014 to develop or revise a form for an affirmative defense to an unlawful detainer action.

 

Rent Sense: Some things don’t change

Rent Sense: Some things don’t change

By Neil Fjellestad and Chris De Marco

FBS Property Management

San Diego is a great place to live but an expensive place to build, own, improve and maintain residential properties. Nearly fifty percent of the area’s residents rent and will continue to do so even as the local economy picks up. So, regardless of whether real estate prices are coming back fast and dynamic or slow and variable dictated by neighborhood, price range and lending policies here are some realities you can count on. San Diego’s mild climate and a healthy lifestyle will attract and hold onto renters. These renters are increasingly demanding which makes being an independent rental owner difficult. If you’re a local rental owner now you hold a winning ticket if you want a preferred retirement. A preferred retirement includes a personal residence plus rental properties held without debt and managed by professionals. This financial condition allows you some important lifestyle choices – where you live and how you live.

Don’t believe anyone that tells you can’t lose at real estate investing. There are mistakes that can lead to a reversal of fortune while owning rentals even in the best of San Diego neighborhoods. Let’s highlight a few:

  • Forget what those infomercials are preaching. Owning too much of a good thing: too many properties; too little equity can unravel the whole thing. Buy and hold less is better.
  • Real estate decisions are important. Terms of purchase, mortgage restrictions, management choices and maintenance priorities must conform to a long-term holding strategy while adhering to best practices.
  • Churning real estate is expensive. Buying, flipping, selling and trading in the pursuit of a bigger or better property often drains equity with transaction costs and taxes.
  • Selling prematurely because of a problem tenant, deferred maintenance or bad loan needs to be compared to hiring better management, renegotiating loans and/or adding capital.

Rent Sense: Another Economic Perspective

Rent Sense: Another Economic Perspective

By Neil Fjellestad and Chris De Marco

FBS Property Management

We have built a healthy San Diego business out of advising independent real estate investors, acquiring and managing rental properties for clients while providing superior housing alternatives for qualified renters. More than four decades with properties in 69 zip codes throughout the region provides us a realistic view of the local economy in real time.

Here are some highlights –

  • Most renters pay their rent on time every month. Especially during uncertain times this becomes a financial priority.
  • Rent is clearly their largest household expense and growing as a percentage of household income. In this region a significant number pay more than half of their income as rent.
  • Renters want the privacy, security and convenience of paying their rent online. Those using this alternative pay sooner and avoid additional late charges.
  • Rental owners faced with vacancies that improve their properties even if forced to borrow funds to do so and/or must perform capital improvements gradually are rewarded with more qualified applicants to lease.
  • Existing residents will more likely renew and/or pay a higher rent to live longer at a property that is well managed and maintained.
  • Most rental owners are concerned about leaving a property vacant and will adjust rent realizing that number of days rented is more important than holding out for the highest rent rate.
  • Real estate investors that are buying are satisfied. Those that are selling or re-financing in the current market environment remain frustrated with the lack of expected results and/or inadequate estimate of time to accomplish.
  • Many of the jobs lost over the last 3-5 years are gone. Though other jobs are being created with different requirements and rewards the transition is longer than hoped.
  • Existing small businesses will create jobs when and if they can control risks (the cost of doing business) while believing that the benefits of growth outweigh the alternatives.  Much of this risk will be driven by new businesses.

Rent Sense: Respect Your Customers

Rent Sense: Respect Your Customers

By Neil Fjellestad and Chris De Marco

FBS Property Management

Independent rental owners contact us daily for advice and seek our management help to optimize rental operations. We ask the hard questions – what specifically are they doing to motivate renters to sign a long-term lease at top rental rates and pay the rent on time; every month? After we walk their properties, examine their routines and audit their records we devise a concrete plan of action to gain and maintain customer respect. Perhaps the following will help you get started on your own.

  • Why not make a few minor adjustments to improve the appeal of the exterior of your property? Replace dead or dying landscape, fill pot holes in the parking area(s), make sure the outside is well lit, provide adequate trash container(s) and pick-up, sweep walk ways, wash windows and keep the property clean. You are saying with your actions that property value is as important to you as the monthly rent collected.
  • Do your rent and repair policies demonstrate respect? “Green living” and a renewed frugality are important to all of us. By using energy efficient lighting along with timers you are demonstrating a respect for the rent your resident(s) pay(s). Your building’s water use can be improved with low-flow shower heads and commodes. Timers on exterior watering that adheres to neighborhood and/or community standards save money. Renters(s) are paying for these property expenses through the rent charged and they know it. Your wise property expenditures are a reflection of your respect for your resident(s) as well as your property value.
  • Are you making it easy for your rental customers to do business with you? Make it easy for your residents to pay rent and submit maintenance requests online from their smart phone. Potential renters should be able to fill out an application the same way.  These modern technologies ensure that monies and information move with speed and security. It also says that you want to compete to keep your renter(s); that you respect their time and their money.
  • Are you on top of what other rental properties are currently charging? Being competitively priced demonstrates customer respect.  Your confidence in this regard will be evident in your resident decisions and communications including strict adherence to rent collection according to the lease. Your renter(s) will respect your requirements.

Rent Sense: What about Month-to-Month?

Rent Sense: What about Month-to-Month?

By Neil Fjellestad & Chris De Marco

FBS Property Management

We have noticed an uptick in the number of our renters opting for a month-to-month rental agreement at renewal citing personal current concerns about contractual commitment. Such agreements are only offered at a rental premium and we generally advise our rental owners that a long term lease attracts and best serves qualified renters. We will consistently choose to retain our existing residents as their lease expires because the owner(s) will experience an interruption of rent and out-of-pocket costs connected to the turnover. So residents that have paid their rent on time and kept up the rental home will get preferential treatment at renewal though with the current housing conditions the likelihood is that a nominal rent increase will be included.

Due to projected supply and demand for well-located rental homes, condos and apartments rental rates will continue to increase for the next few years. Actually this condition is healthy in order to encourage existing and potential investors by allowing rental increases across the board that can repay out-of-pocket expenses endured during the last several years and/or to accomplish repairs and improvements that they have deferred.

As a month-to-month tenant you are not protected from multiple rent increases and owners will more likely postpone requested maintenance until you move. There are still some owners that are consolidating their property holdings to preserve equity and credit worthiness. In some cases, this results in vacating their rental properties. Certainly having a renter on a month-to month agreement makes this decision easier.

While an owner’s decisions can affect their credit, it often has a much greater affect on the renter(s) living in that home. Once a property is in foreclosure or it is given back to the bank a real estate company is hired to sell the home/property. It is often the decision to vacate the property as it is believed to be much easier to sell an empty property.

By being a preferred renter on a long-term lease no one can decide to raise your rent because they feel like it. No one can ask you to vacate the property on a whim or with a short term notice. If the property is marketed for sale and/or changes ownership your lease will normally be honored by authorizing you to live there through the duration of the lease term, or provide you with some compensation if they want you to vacate.